small business management chapter 4 the business plan
TRANSCRIPT
SMALL BUSINESS MANAGEMENT
Chapter 4The Business Plan
Aggasiz Brewing Company
1. Briefly discuss the problems of starting from scratch, as illustrated by the Aggasiz Brewing Company
2. How could Gary DePape have avoided these problems?
3. What would have been the advantages and disadvantages of Gary purchasing a microbrewery instead of starting from scratch?
4. What risks would Gary have faced if he had dropped the price of his product?
Getting StartedEstablishing the Business
Advantages of Organizing a Business from Scratch Define nature of business Exact physical _______ Fresh inventory Employee selection Develop _______ system
Getting StartedEstablishing the Business
Disadvantages of Organizing a Business from Scratch Lack of _______ info Time assembling physical facilities Start-up bugs & problems Establishing outside relationships Risk of _______
Caribbean Beer vs Agassiz Beer
Compare and contrast the two small business ventures in similar industry Non-Quantitative Assessment
Personality Characteristics Goals Content of _______ Lifestyle Capabilities Experience
Quantitative _______ of Business
Small Business Plan
_______ purposes Blueprint to maintain focus Tool to evaluate performance
_______ purposes Recruit lenders & investors Test of ideas viability Form and emphasis will vary depending
on the user
Customers
Suppliers
Investors
Employees
Firm’sManagement
Insiders
Outsiders
New Venture
Business Plan
The Investor’s Perspective
Plans that speak the investors’ language: Are brief, not extremely _______ in written
length. Have an a _______ overall appearance. Are well-organized with a table of
contents and numbered pages. Are _______ _______ in meeting
customer needs; are not product-oriented.
Show _______ of customer acceptance of the proposed product or service.
Features of Plans that will Repel Investors
Plans that create _______ reactions: Show an infatuation with the product or service
and downplay market needs or acceptance.
Are based on financial _______ at odds with accepted industry norms.
Have unrealistic _______ projections.
Business Plans that Attract Investors
• Recognize the _______ needs for required rates of return on investments.
• Demonstrate _______ of focus on a limited number of products or services
• Have a proprietary market position through patents, copyrights, and _______
Business Planning Needed and Influencing Factors
Factors affecting the extent of a business plan: Cost in _______ and money to prepare the plan
Management style and ability _______ of the management team Complexity of the business Competitive _______ Level of _______
Preparing a Business Plan
Two issues critical in preparing a business plan: The basic format and _______ of the written presentation. Clear writing that effectively communicates
The _______ of the plan. Factual support for the concept
in the form of _______ _______ evidence
Resources for Business Plan Preparation
Computer-Aided Planning Word-processing Spreadsheets
Specialized _______ Plan Software Packages (BizPlan) Professional Assistance
Lawyers Marketing specialists Engineering and production experts Accounting firms Incubator organizations Small business development agencies
Research to Support the Plan
Both primary and secondary research must be carried out by the writer of the business plan.
Secondary Research
Primary Research
The Small Business Plan
There are ten components in a plan:1. Prepare a table of contents.2. Prepare a synopsis of the plan in an
executive summary and background statement.
3. Describe the management team.4. Describe the business objective.5. Plan the marketing approach.
The Small Business Plan
Components of the Plan (cont.)6. Describe the selection of the location.7. Determine the physical facilities.8. Plan the financing.9. Plan the personnel.10. Investigate the legal requirements.
Components of the Plan
1. Prepare a table of contents. Overview of the plan Quick access to the various parts of the
plan
Components of the Plan
2. Prepare synopsis of the plan in an executive summary and background statement. completed at the end of the complete
plan history of the project to date statement of the intended mission of
the venture
Components of the Plan
3. Describe the management team. résumé and background of those
making the decisions for the organization
Components of the Plan
4. Establish business objectives. Business Size Production Levels Performance Levels
Components of the Plan
5. Plan the marketing approach. Have a clear concept of the target
market. Understand the target market’s needs,
wants and purchasing habits Answer the following questions: where,
when, what, how much, why.
Components of the Plan
5. Plan the marketing approach (cont.) Be aware of any uncontrollable factors that
might affect the marketing of the product or service such as
existing or pending legislation relevant to the business.
state of the _______ in the market. extent and strategies of the competition. cultural _______ of the market. new technologies that might offset the
business.
Components of the Plan
5. Plan the marketing program (cont.)
Components of the Plan
6. Describe the selection of the location. the trading area
the Economic _______ attitude of the _______ area towards
new businesses Competition Costs
Components of the Plan
6. Describe the selection of the location. The Site
accessibility, site costs, _______, site history, proximity to other businesses, physical characteristics
The Buy-or-Lease Decision cost of the lease, length of the lease,
restrictions, repairs and lease hold improvements, _______ coverage
Running the Business from One’s Home
Components of the Plan
7. Determine the physical facilities. Building, equipment, fixtures, starting
inventory _______ flow in business
Production, layout, distribution of product
_______Don’t risk more than you can loseDon’t risk a lot for a littleBuy insurance only when necessary Investigate company and agent
Components of the Plan
7. Determine the physical facilities. insurance types
loss or _______ to the property business interruption liability and _______ life insurance
insurance _______ what kind to purchase, how much to purchase,
from whom to purchase the insurance
Components of the Plan
8. Plan the financing. establish capital requirements make _______ projections determine the sources of funding plan the _______, and bookkeeping
systems determine the _______ evaluation
measures
Components of the Plan
9. Plan the personnel. Administrative structure Employee _______ and training Personnel Policies
Components of the Plan
10. Investigate the legal requirements. Legal Structure (four styles)
1.Sole _______ advantages and disadvantages
2. Partnership Limited, _______ advantages and disadvantages
3. Cooperative one member-one vote vs each share a vote
Components of the Plan
10. Investigate the legal requirements. (cont.)
4. Corporation advantages and disadvantages of a
corporation steps in incorporation
selection of the business name development of the share structure,
directors, restrictions on share transfers, etc.
description of the company operations acquiring the necessary supplies
Components of the Plan
10. Investigate the legal requirements (cont.)
5. Joint Ventures
Components of the Plan
10. Investigate the legal requirements. (cont.) Licenses and Taxes
Federal Government Provincial Government Municipal Governments
Intellectual Property Protection patent steps
Appendices
Appendix A - Checklist for a Small Business Plan
Appendix B - Sample Business Plans (2) The Sock Hop, Quality Cuts
Appendix C - Incorporation of Companies and Associations
Appendix D - Jurisdiction of Licenses and Taxes
Concept Checks
1. What are the advantages and disadvantages of owning a small business?
2. What steps are involved in preparing a business plan?
3. What criteria must be evaluated before choosing a trading area?
4. When is it advantageous to lease instead of owning?
Concept Checks
5. What information should be investigated before construction starts and purchasing equipment?
6. Why is insurance purchased? What are some small business insurance types?
7. What major financial aspects should be planned in advance of business operation?
8. What are four legal structures that an owner can utilize?
Concept Checks
9. What are the advantages and disadvantages of incorporation?
10. What level of government issues business licences?
11. What taxes are levied by the federal government?
12. What are the steps required to register a patent?